The U.S. Supreme Court agreed Monday to hear the Obama administration's request to dismiss a lawsuit by a San Francisco pilot against federal agencies that disclosed his HIV-positive status during a fraud investigation, a case that could determine the scope of a post-Watergate privacy law.

At issue in Stan Cooper's case is whether agencies that reveal an individual's medical records or other private information can be sued for causing emotional distress. The Obama administration argued that the 1974 Privacy Act allows damages only for financial losses, which Cooper did not claim in his suit.

The Ninth U.S. Circuit Court of Appeals in San Francisco ruled in February 2010 that Cooper could seek damages for emotional harm. The Supreme Court granted review of the administration's appeal Monday and will hear the case in the term that begins in October. The issue of whether plaintiffs can seek damages for emotional harm under the Privacy Act has divided the nation's appeals courts in other cases.

Cooper's lawyer, James Wood, said the case would affect the continuing vitality of a law that was passed in response to revelations of break-ins and surveillance of private citizens during President Richard Nixon's administration.

"More often than not, embarrassment and humiliation are the only damages," Wood said. "Unless these are compensable, it's a free license to the government" to break the law.

Cooper, a small-plane pilot, started flying in 1964 but gave up his license after he was diagnosed HIV-positive in 1985, when FAA rules still denied licenses to anyone with the AIDS virus.

Cooper reapplied for a license in 1994 without disclosing his condition. His health briefly worsened in 1995 and he applied for Social Security benefits, with the assurance that his medical records would remain confidential. Although the FAA repealed its HIV ban several years later, the agency revoked Cooper's license in 2005 after obtaining his medical records from the Social Security Administration. The FAA's investigation was part of "Operation Safe Pilot," which examined records of 47,000 Northern California pilots to see if they had committed fraud in obtaining Social Security benefits or a pilot's license.

Cooper pleaded guilty to a misdemeanor charge in 2006 and was fined $1,000. The FAA restored his license later that year.